Canadian dollar strengthens ahead of BOC rate decision

The Canadian dollar was higher Monday, as a dearth of economic data shifted the focus to the Bank of Canada rate decision due for Wednesday.

The loonie was higher amid solid US retail sales data and mixed commodity prices. US retail revenues increased 1.1 percent in March, the biggest monthly gain since September 2012. The stronger than forecast reading suggests the US economy has emerged from its weather-induced slowdown, a good sign for Canadian exporters.

The Canadian dollar rose 13 pips to 0.9124 US. The loonie has gained more than 1.3 percent over the past four weeks amid signs the Canadian economy was gaining traction. Latest data on gross domestic product, trade and employment have all outpaced forecasts.

Statistics Canada will report on consumer price inflation Thursday before the markets break for Good Friday.

The Bank of Canada is expected to keep its benchmark lending rate unchanged at 1 percent. The investing public will monitor the rate statement for clues about future policy, and whether central bank officials feel more upbeat about the Canadian economy. Given the trajectory of the Canadian and global economies, the likelihood of a BOC rate cut has diminished. However, the central bank is expected to keep interest rates accommodative for some time.

The Canadian economy is forecast to grow 2.3 percent this year, according to revised estimates from the International Monetary Fund. Only the United Kingdom (2.9 percent) and the United States (2.8 percent) are expected to top Canada in GDP growth.

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